---
title: "Will 7-Eleven Be Defeated?"
description: "Japanese convenience stores are experiencing a 'disconnect' in China again. As competition intensifies and performance declines, the three giants 7-Eleven, Lawson, and FamilyMart have successively adjusted their executive teams. Can they find a way to break through? 24-hour convenience stores in the Chinese market seem to be moving from glory to confusion."
author: "BT财经"
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published: "2022-06-09"
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# Will 7-Eleven Be Defeated?

> Japanese convenience stores are experiencing a 'disconnect' in China again. As competition intensifies and performance declines, the three giants 7-Eleven, Lawson, and FamilyMart have successively adjusted their executive teams. Can they find a way to break through? 24-hour convenience stores in the Chinese market seem to be moving from glory to confusion.

Japanese convenience stores are experiencing a 'disconnect' in China again. As competition intensifies and performance declines, the three giants 7-Eleven, Lawson, and FamilyMart have successively adjusted their executive teams. Can they find a way to break through?

24-hour convenience stores, in the Chinese market, seem to be moving from glory to confusion.

Some say that 24-hour convenience stores are a yardstick for measuring a city's modernization, convenience, and comfort; some say they are a night light always lit for urban youth; others have noticed that convenience store shelves have become a battleground for FMCG brands.

Image source: Chuangketie

After gaining a foothold in first- and second-tier cities, convenience stores have rapidly expanded into third- and fourth-tier cities in recent years. However, recently, 24-hour convenience stores have frequently been hit by turmoil. 7-Eleven, Lawson, and FamilyMart have successively adjusted their executive teams, and some media have questioned whether 'Japanese-style convenience stores' have lost their competitive edge in the Chinese market.

Is that really the case?

**Japanese Convenience Stores Successively Change Leadership**

As the physical retail format closest to end customers in the entire retail system, convenience stores were once given more imagination by capital and internet companies. But as one after another falls into operational difficulties, Japanese-style convenience stores seem unable to fly again.

The three giants of Japanese convenience stores—7-Eleven, Lawson, and FamilyMart—have all been looking for 'captains who better understand the Chinese market' in recent years.

According to recent reports from media such as Retail Circle, **Uchida Shinji, former chairman of 7-Eleven China, no longer serves as chairman, and the new chairman is Yan Qian, former CFO and general manager of 7-Eleven China.**

This significant personnel change quickly drew attention from the retail industry. The above reports also revealed that during the special pandemic period, the management of 7-Eleven is focusing on store operations and assisting business development, without providing more detailed explanations for the leadership change.

It is obvious that **7-Eleven has seen declining performance this year and is in a dilemma, seeking someone who better understands the local Chinese market, hoping to find a turning point.**

Similarly, the other two Japanese convenience store giants are also making similar executive adjustments—

In July 2021, Lin Jianhong, executive director of FamilyMart China, resigned; shortly after, it was reported that Zhang Sheng, executive director of Lawson and director and vice president of Lawson (China) Investment Co., Ltd., left his position as executive director of Lawson Inc.

Japanese convenience stores were once the learning object and industry benchmark for China's retail industry. It is not an exaggeration to say they symbolize the highest level of the industry. From 24-hour operations and strong supply chain management capabilities to high-standard quality control and brand management that cater to Chinese consumers' consumption upgrades, even shelf placement and product display... every operational detail of the '7-Elevens' has been meticulously studied by Chinese convenience stores and the entire retail industry.

However, as the saying goes, 'the front wave is easily swept onto the beach by the back wave,' in China's vast market, the operational crisis of Japanese convenience stores has also begun to emerge.

In the second half of 2019, 7-Eleven's parent company announced a large-scale adjustment plan, declaring it would cut 4,000 jobs and close 1,000 7-Eleven stores by 2022, shocking the retail industry.

At the same time, a host of local Chinese convenience store brands such as Haolinju, Today, Linji, and Tianfu have developed rapidly with the support of capital.

**The secret to Chinese local convenience stores' 'overtaking on the curve' is data and data-driven marketing strategies.**

On the storefront side, big data on consumer behavior has become a new engine driving transaction volume growth in recent years; on the supply chain side behind convenience stores, digitalization is also a magic weapon to increase profit margins and profitability, help reduce inventory, and improve turnover.

Coupled with the fact that China's retail industry has already mastered digital marketing and membership systems, consumers show great enthusiasm for participation with a little 'burning money'—letting consumers 'fleece the wool' is a marketing expansion secret across industries in recent years, and the convenience store industry has found it effective time and again.

A set of data shows that from 2016 to 2020, the number of local Chinese brand convenience stores surged from 94,000 to 193,000, and the average daily transaction amount per store increased from 4,504 yuan to 5,167 yuan. According to analysis by Toubao Research Institute, the total revenue of Chinese chain brand convenience stores is expected to climb from 154 billion yuan in 2016 to 391 billion yuan in 2022, with a compound growth rate of over 15% in the past three years.

In comparison, 7-Eleven's integration with new retail is not only inferior to local Chinese brands but also to the other two Japanese convenience store giants, FamilyMart and Lawson. An obvious example is that the latter two integrated with third-party platforms like Meituan and Ele.me early on, while Beijing's 7-Eleven only announced its integration with Meituan delivery platform in August 2018.

**Local Convenience Stores Also Hit Bottlenecks**

Although holding the 'data-driven' magic weapon, local Chinese convenience stores have also encountered bottlenecks after rapid development.

The most typical example is Quanshi Convenience Store. After Linjia and 131 Convenience Stores were sold due to funding issues, Quanshi, a local convenience store in the Beijing market, also could not escape financial difficulties and ultimately ended up being transferred to Shanhai Lantu and Lawson. The convenience store market has repeatedly seen closures, all due to funding problems, which is not a coincidence.

In 2020, all stores of Quanshi Convenience Store in Beijing, Tianjin, and Chengdu were sold to Shanhai Lantu, while stores in East China and Chongqing were taken over by foreign convenience giant Lawson. This meant that Quanshi, which had been vigorously acquiring and expanding stores the previous year and moving toward its '10,000-store plan,' came to a bleak end, becoming another failure case.

In fact, as early as 2019, Quanshi Convenience Store was already in a whirlpool of public opinion, with media exposing its broken capital chain, inability to pay supplier payments and employee salaries, and a flood of reports about Quanshi's 'cessation of operations,' 'store shortages,' and 'being sold,' sharing the same plight as its peers Linjia and 131.

On May 11, 2020, the news of Quanshi Convenience Store's closure shocked the entire industry. As a veteran local convenience store brand, Quanshi was once called 'the local convenience store most like 7-Eleven,' expanding rapidly with layouts in five major regions of the Chinese market: Southwest, South China, Central China, East China, and North China.

Quanshi Convenience Store was established in 2011, and by 2020, it had nearly 1,000 stores nationwide. Shortly before its closure, Quanshi also announced a plan of '10,000 stores in five years, 1,000 stores within the year.' Previously, Quanshi also revealed that in the fourth quarter of 2020, it would try new business models such as front warehouses and focus on product and e-commerce businesses.

Li Jin, a researcher in the new retail industry, pointed out that during its rapid expansion, Quanshi Convenience Store did not achieve stable operations. It kept burning money without generating benefits, so the eventual acquisition was foreseeable.

Li Jin also believes that because stores are located in bustling areas, the convenience store model inherently faces high rent and labor costs, making profitability very difficult. Even Japanese convenience store leaders like 7-Eleven and Lawson have been in China for over 20 years and still have not achieved overall profitability. If they rely solely on capital to maintain and expand crazily, once the capital chain breaks, it is like dominoes, and various fatal problems will follow.

Li Jin analyzed that the capital-driven convenience store operation model can open hundreds of stores a year, but the core issue is whether they can sustain operations. If stores do not build their own core competitiveness to achieve 'store supporting store,' the outcome is predictable.

**Downward Expansion and Fierce Competition**

**With the continuous advancement of China's consumption upgrade, the 'battlefield' of Japanese convenience stores has also begun to sink from first-tier cities to second- and third-tier cities.**

Let's first look at Japanese convenience stores. In 2019, 7-Eleven established 7-Eleven (Tangshan) Co., Ltd. with Tangshan Jinshi Group and Beijing Zhuangdian Group, which was seen at the time as a sign of its entry into third-tier city markets.

Lawson also adopted a strategy of jointly expanding with domestic brands. It once partnered with Zhongbai Group to create 'Zhongbai Lawson,' which has developed rapidly in the Hubei and Hunan markets (including Wuhan, Changsha, Huangshi, Jingmen, etc.) in recent years, maintaining a pace of adding more than 150 stores annually. According to data from the end of 2019, Zhongbai Lawson had 450 stores with annual sales exceeding 1 billion yuan. **In 2020, Zhongbai Lawson was also reported to have completed independent financing of tens of millions of yuan.**

However, the sinking market itself also has some local convenience store chain brands. For example, Meiyijia Convenience Store, which is steadily growing in the Central China and South China markets, completed the relocation and production of its Hunan Industrial Park in March 2021, which can meet the simultaneous distribution needs of 5,000 stores in South China; in October 2020, its Hubei Digital Industrial Park was also officially laid, intending to build a provincial production, procurement, sales, and distribution center. Data shows that Meiyijia's market share increased from 8.9% in 2019 to 9.4% in 2020, and its development speed should not be underestimated.

From the current deployment, the battle for the convenience store market may have just begun.

**Digitalization and Refined Operations Are the Direction?**

The convenience store competition is fierce, and the Chinese market and consumers have their own particularities. In this context, data-driven and refined operations are necessary requirements for players to grasp both aspects firmly.

This is somewhat similar to Chinese kung fu: you must win with speed while also cultivating internal strength.

**Data-driven is about making convenience store operations more and more 'fast'** . Specifically, communication efficiency, user operation efficiency, and logistics distribution efficiency are the three most important cores.

For example, 'communication efficiency' between consumers and stores is achieved by collecting consumer shopping behavior, dynamically understanding consumer needs, and thus achieving precise product placement; or further segmenting different consumers' shopping behaviors and preferences to achieve precise marketing.

User operation efficiency is about developing a comprehensive user membership system to increase consumer stickiness and purchase frequency.

Logistics distribution efficiency is achieved by cooperating with third parties like Meituan and Ele.me, or even building your own logistics distribution system to expand store coverage; in addition, it is necessary to digitally upgrade the supply chain and distribution efficiency to meet the unique high demands for delivery speed in the Chinese market.

**Refined operations are a long journey for enterprises to enhance internal strength** . In this regard, the most obvious is that local Chinese convenience store enterprises still have a considerable gap to catch up with Japanese-funded enterprises' brands.

Take FamilyMart as an example. It has been praised by some media as the 'invisible champion of Shanghai's business districts,' covering almost every street and subway station in the city, and has steadily deployed its camp in East China at a speed of 'nine cities in ten years.'

'Whether it is convenience stores or other camps of new retail, such as supermarkets or fresh food, almost no one does not regard FamilyMart as a competitor and wants to pull it down'—an industry insider commented. When convenience stores began selling coffee, FamilyMart's 'Paike Coffee' was also the first brand to stand out.

Lin Jianhong, former executive director of FamilyMart China, once said in an interview that the convenience store industry emphasizes standardization and consistency, but he focuses on 'flexibility'—FamilyMart wants to be close to consumers, whether in office buildings or residential areas. FamilyMart should follow the lifestyle and pulse with Chinese people's lives.

**This is the spiritual core of people-oriented refined operations standing opposite to data.** Of course, this requires years of meticulous cultivation, infiltrating consumers' hearts from countless details, from the temperature of rice balls, the price of coffee, to the attitude of service, and even trivial matters like how product packaging is torn open.

However, in recent years, even veteran Japanese convenience stores like FamilyMart have been exposed to negative news such as poor service, product quality issues, and serious double standards. It can be said that on the road of refined operations, brands must be careful to sail for ten thousand years, and a moment of carelessness can 'fall from the altar.'

On one side is data-driven, on the other is refined cultivation, like the opposition of rationality and sensibility. The two seem contradictory but are not mutually exclusive. What lies ahead for Japanese convenience stores is that they must walk both paths well to eat this tempting big cake of the Chinese market.

Source: BT Finance (ID: btcjv1)

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